China is currently the world’s largest steel
producer. Yet, it is not the only one. Other countries also export the said alloy
and China itself imports some. In 2017, it imported 703,000 tons –a 200% increase
compared to the previous year.
A good share of these imports comes from
Indonesia, a country which has recently attracted foreign investors in the
steel industry. The country is rich in copper, tin and carbon. There are also large
supplies of nickel, a material widely used to get stainless steel. An investigation
was carried out by Chinese authorities in Indonesia after a complaint by Shanxi
Taigang Stainless Steel and other four firms that alleged dumping practices.
The products targeted are stainless steel
billet and hot-rolled stainless steel sheet. Chinese firms worry that imports
from Indonesia could cause a fall in prices, as shown by the 2017 steel imports
figures. Prices of imported steel products plunged 23% in a year and the trend
could expand to domestic products.
Different Chinese companies are involved in
the investigation, including Tsingshan Stainless Steel, a major metal producer,
which has heavy investments in Indonesia and runs an industrial park at
Morowali.
The probe is the last step of an enduring
challenge between the two nations. Indonesia is expected to lead the nickel
market in the next ten years, as its production is predicted to increase by more
than 8% by 2027 -far more than any other competitor.
Indonesia is recovering quickly after a
previous export ban was amended in 2017. In addition, Indonesia can take
advantage of Philippines’s stop in nickel production as a consequence of environmental-friendly
policies.
In the short-term, this surge in nickel
production will help Indonesian steel mills to increment their output. The government
wants to increase overall capacity to 17 million tons by 2024 and 25 million
tons by 2035. Only Tsingshan’s owned plant will produce 3 million tons by the
end of this year, and more Chinese firms are expected to invest in the country
in the years to come.
The main advantage of Indonesia-based steel
producers is the availability of low-cost raw material. Indeed, on benchmark
LME nickel price has risen 27% last year and the trend is continuing, while
stainless is not following nickel’s rally. If this situation will not change,
Chinese steel industry could be damaged by an expansion of stainless production
in Indonesia.
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